Operational management of contractual and transactional interactions between buyers, sellers, financial institutions and others involved in the exchange of products for purposes of commerce have typically been labor and time intensive. Generally, the processes of managing transactions between business entities have been unduly burdensome and inefficient.
For many organizations, managing and tracking transaction financing functions such as those related to accounts payables and/or accounts receivables can be particularly burdensome and costly. When a particular organization contracts and otherwise does business with a large number of suppliers/sellers, the organization typically must interact with each supplier/seller on an individual basis. As the diversity of these interactions increases, the burden and cost associated with managing and tracking finance-based business functions is exacerbated.
Individual interactions between buyers and sellers are often characterized by specific contracts, payment rules and other financial processing characteristics. For example, certain sellers may require payment terms such as a net payment due within a particular time period, payment to a particular financial institution or payment in a particular currency. In addition, certain sellers may require different payment terms for different contracts. Entity-specific and transaction-specific variances in payment terms can be particularly difficult to manage and track. Buyers, on the other hand, may prefer payment terms that may be inconsistent with those required (or desired) by sellers.
In addition, when a transaction reaches the payment step, financial institutions for different parties to the transaction must interact with each other. This interaction typically involves complex agreements and associations that facilitate the transfer of funds. At times, there can be delays in payment or disputes regarding terms of payment. In addition, this process is highly susceptible to error. Interaction complexity, delay and error, as well as a multitude of other characteristics of transaction payment can cost one or more parties to a transaction (including financial institutions) a significant amount of funds.
Most industries are quite competitive and any cost savings are therefore important. Administrative costs are targeted for reduction as no revenue is directly generated from administrative functions. However, administrative costs associated with commercial transactions have been difficult to reduce in the current business environment with widely diffused data.
The above and other difficulties in the management and coordination of business transactions have presented administrative and cost challenges to business entities involved in various aspects of transactions, including accounts payable aspects and others.